Afford Anything - How Jeremy and Winnie Retired in Their 30's

Episode Date: April 25, 2016

#22: Jeremy and Winnie are the bloggers behind Go Curry Cracker. They took a vacation to the Philippines and decided this was where they wanted to live - and retire there early (like REALLY early). For more information visit https://affordanything.com/episode-22-jeremy-winnie-retired-forbes-go-curry-cracker/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

I am no longer podcasting out of the closet. I'm now officially in the bedroom. Welcome to The Money Show, a podcast about mastering your money and time so you can live your optimal life. This show features interviews with entrepreneurs, financial experts, and regular people who share amazing insight into investing, business, money management, and productivity. There are many roads to financial freedom. This show explores them all. Grab a beer, kickback, and enjoy the money show. When Jeremy was about 26 or 27 years old, he took a vacation to the Philippines and liked it so much that he decided, I don't want this to just be a vacation.

I want this to be my life. I want to be able to travel, hang out on the beach and eat mangoes and drink fruity drinks all day. Yum, yum. So then he made a plan. And in roughly about 10 years, give or take, he and his wife Winnie and now their newborn son are. doing exactly that. They're living in Taiwan and totally financially independent. They're living the dream. Yeah. earning money off of their investment income and hanging out. And blogging. Don't forget. They blog over at go currycracker.com and share their tips how they got to this point, their mentality.

They talk a lot about taxes actually. They're super, super smart with hacking the system all legally, but figuring out how to pretty much, you know, they make like $100,000 a year and pay zero taxes. and they taught Paula something that she was really excited about on this show. Yeah, I get pretty excited at some point during the interview here. So yeah, it's a really, really, if you're interested in, regardless of what phase you are in the early retirement financial freedom section, I think you're going to learn in a different style of how to get from point A to point B. So we connected with them. They're based in Taiwan. Jay, you're in the D.C. area.

I'm in Vegas. So we all connected around the globe to have this conversation. about early retirement. The audio quality is a little shaky at times, but the ideas are pretty good, so I really hope you enjoy it. Yes. Hey, Jeremy and Winnie. Hey, Paula. Hey, Jay. Hi, guys. I'm super excited to talk to you guys today. So I was just reading this Forbes article about the two of you. You have a fascinating story. I'm going to quote from it a little bit. It starts off by saying, Jeremy graduated from college on a Friday, started working at

Motorola on a Monday, and worked 80 hours a week for the next four or five years. What fueled his work ethic was $40,000 in debt, $35,000 from student loans, and $5,000 in credit card debt. But his desire to keep up with his peers led him on his $40,000 salary to buy a new car and a three-bedroom house. which turned his previous bike ride to work into a 40-minute commute. The added debt got him to focus on his finances, so he began making models of how he could pay it off. He mapped out his trajectory to retirement at 65 and began investing. Then he used credit card checks charging 0% interest for 12 months to pay big chunks of his mortgage, student loan, and car loan. When he started working at Microsoft and moved from Chicago to Seattle,

getting a salary bump to $85,000, he made many of the same decisions again, a house, a long commute, no vacation. Three years in, a girlfriend convinced him to take his first real vacation to the Philippines. He spent the first week thinking about work, but by the third week, he was wondering how he could live like this every day. Okay, so I'm just, wow. That's a lot already. Yeah. What a loser. And the girlfriend, the story, I never heard of that.

Girl, spend me. Who's that girl? And then, Winnie, the story goes on to say that by the time that the two of you met, you were already saving 50% of your income. So you were way ahead of the game. So, wow. Okay, we've got a lot going on here. I'd actually, I'd like to tell each of your stories first from where they started up before you met.

So, geez, who wants to go first? Go for it, Jeremy. Well, I mean, the Forbes intro is pretty good. I mean, like, I sort of grew up with a pretty poor financial education, you know, like kind of low-income family and food stamps and so on. And I think I was the first person in the extended family to sort of leave, you know, small town of Minnesota and go to college. Good for you did. For a better life, you know. But I was terrified of being in debt.

Like, everybody who I knew who had, you know, nobody was successful with money. They're always problems. And it was debt-driven, right? like, you know, or like kind of low-skilled job leading to low incomes and those problems. I just focused every penny I had was going to go into the student loans and sort of trying to claw out of out of that debt that I'd obtained in college. That vacation years later where I started to even think that there was maybe another way to live.

In that intro, talking about planning to like retire at 65, like, at what point did your mind like switch off and be like, oh, crap, if I actually do this and this, Like, I could be done in, you know, 10 years or however long it took you to get to that point. So that started to happen on that vacation. I was scuba diving in the Philippines and drinking tropical beverages and having giant shrimp the size of your head, you know. And I thought, like, hey, this is all right. This is way better than being at the office. All right.

Do you remember how old you were at that time? Maybe like 26 or 27. And I remember, like, my mom bought me a book, just something like retire early and retire rich or something like that. I like rolled my eyes and like, oh, mom, like, why do you buy me these garbage books? Those are scams. Like nobody does this, right? Like, this is total BS. But I never knew there was another way until I had experienced this kind of short-term joy of the vacation.

And then came back and started working on the business plan and tried to figure it out. It took me a while. There were no logs then. So I would go to the library and just read every finance book they had. I sat down with the free financial advisors they have at Fidelity. And at that time, I think the plan was like, hey, I'm going to live on 8K a year on a beach. Do you think that would work? The person like just plugged the numbers into their thing.

And they're like, holy crap, I think it will. Wow. Wow. I was not expecting that. Yeah, it was cool to hear that they're supportive. Yeah. The whole model I had at the time was super naive. Like, you know, okay, you know, the investments will go up like X percent every year.

And I'll live on like this ridiculously low amount of money. And it evolved because I started seeking out people who'd done it. I met with, let's see, Billy and Acacia Catterley, they have retired early lifestyle. I met with them in Thailand. Like they retired in their late 30s, like 30 years ago. Oh, wow. So, you know, being able to sit down with them and just kind of get validation, like, yeah, like this works. You know, and then I also, like, we together met with Doug Nordman from military guide.

Surfer dude. Yeah, surfer guy lives in Hawaii. Yeah. So we were on like our second honeymoon. It all paid for it with airline miles and points and stuff. And we met with Tim in Honolulu. And he's like, yeah, like, why would you not do this? This is an awesome life.

And so we just kind of bit by bit pieced it together through other people who'd done it and reading and trial and error. Okay. What were you spending like before you made this transformation, like yearly expenses? And then what are you guys spending roughly now? Well, way back then, like I had a house and a car and a motorcycle and I don't know what my actual budget was. But after that vacation, you know, over the next couple years, like I sold the house, sold the car, sold the motorcycle, moved close to work. We started biking to work. And then like the last several years when we were living in Seattle, we were spending 20K a year.

Like most of that was just rent. And we even kind of scraped the bottom of the Seattle market on rent. Like we were paying 400 and something for a while. And like this place in Chinatown, and we're just like, we cannot live here. This place is disgusting. But like we totally pushed our boundaries on every angle that we could in every area and then worked our way back up. So when we moved into a place that was in like 980 a month, we just felt like we were in this

castle because we lived in this small dump. And so we kind of appreciated what we had over those last several years, even though we were spending like no money. And at what point did you kick out your girlfriend and get a suitable life for yourself over here? That was shortly after vacation. Can you dig you more? We're going to turn this into a whole different kind of show in a second.

I know, right. I meant it for a lead-in for you, Eni, so you could talk about it, but maybe there's some more juicy stuff behind the curtains. We met in like 2004? 12, 13 years ago. Okay. How old are both of you right now? I don't remember

I'm 36 Yeah I'm 41 41 Okay so then Jeremy If you were 26 or 27 During that trip to the Philippines You're 41 now

So basically the story covers about Roughly 14-15 years timeline between That very crucial decision point to today Yeah We've been traveling for almost Four years Nice

So the whole transformation took about like 10 years more or less. Yeah, 11 years. Yeah, because that's what I was telling Paula, like there's a lot of early retirement blogs. And, you know, you guys are in that field now. But, you know, Mr. Money Mustache, Jacob, a lot of these guys that came on the scene kind of already early retired. So it's interesting to hear how they are now. But it's like people don't see all the years leading up to that point. You know, and you guys get, I mean, even the Forbes and all these articles that you guys get in, like you get so much like hate.

love too, but like people just don't get it or that they're so jealous. They just don't know what to handle it and online. They become a-holes. They like attack you, you know, left and right. And they don't understand that that's where you are now. But you hustled and went through all the sacrifice 10 years before that or not even all sacrifice. But you made like this was like a 10 year plan. And that's huge. So people don't get that. It's more like we choose to do that. And during the process, we we kind of enjoy it because we know like every. everything we do, make us get closer to our goal. Yeah, that's awesome.

Winnie, I just wanted to ask about, so tell me about your story. Like, what were you doing at this point? Back before you met Jeremy, before all of this, walk me through your career. I grew up in Taiwan in a really poor family. Like, my parents got divorced when I was eight years old. They have to put me into orphanage for three years because they don't have, yeah, they don't have money. to support our life. Ever since I have this fear of, I need to have money.

So after college, I start working and try to save as much as possible. Good for you. So I work in the electronic field. That's how I met Jeremy. We met in Beijing. When we talk, I kind of get an idea that he's also quite frugal. because he wear like a really old tuxer which just like a little logo on top

and like a really bad jeans and then the first thing he asked... Hey, hey, let's stop recording now. And then the first thing he asked me to do is take him to go to shop at the street vendor and bargain for him because he cannot speak Mandarin. Wow, smart dude right there. So like, wow.

And that was endearing to you. You like that about him. Yeah, this person seems to have something in common with me because I also like to save. And Winnie, were you saving for anything in particular or were you just saving because you wanted to make sure that you had financial security? I saved for insecurity. I just want to make sure I have money in my bank. Yeah. When you met Jeremy, at what point was Jeremy, did you guys both come together with this like 10-year early retirement plan together or was Jeremy already in the works when he met you? When we met, he had this idea.

He wants to save a lot and stop working. And we don't know how long we can do it. We talk about it and we talk about it. We both like traveling a lot. So we were talking about what can do to make it possible. Like we have a proposal. Like maybe he can be a dive instructor. I can be a yoga teacher.

Yeah. And we can make some money on the road. And then after talking with people who really are doing that, some people, they hate their job. They think it's a dream that they can quit their ordinary job and be a dive instructor in some tropical island. But when they actually do it, they are trapped. Yeah, I talk to, I think it was a guy from the Netherlands living in Thailand. And I was like, hey, I kind of want to do what you're doing. And he's like, do not do it.

Like my life is hell. I can't even afford a plane ticket back home. You know, I can't make enough here to even, like, pay my bills. Like, my life is miserable. Don't do it. So I think he worked six months in UK as a postman. To kind of rebuild his. Yeah.

So, like, after talking to more people like that, and we think that there might be not our dream life. So then we started getting into the, well, let's make work optional. Yeah. So, like, at that point, it was either, like, you could quit your jobs and go and travel and kind of live this. Yeah, with no money. Or you can hustle for X number of years. never have to work again unless you wanted to. Exactly.

How did you, what paths are like Paula loves like freaking real estate? Like she lives and breathes. You probably dreams literally about real estate. You know, and I like the stock market. I like Vanguard index funds. You know, so those are like the two paths that we choose to go down the financial freedom round. But there's so many of them, right?

Like what paths did you guys decide to take or are you in multiple things? At present, everything is just invested in the stock market. Nice. Let's see, like 2008 came. We lost like $400,000. People were freaking out about the crash and the world's over. Right. And we were just like, buy more, buy more.

Yeah. We were ready to go right around then. And then because of the crash, we're like, well, let's stay at it for a little while longer. And those last three years, we were pretty much just depositing my whole paycheck and just living off of our dividends and interest. But I tried a bunch of stuff. Like, I was just whatever works. And so I, you know, I was investing in real estate for a while.

And then I was doing hard money lending for people who were flipping properties. And I ended up having to, like, foreclose on a property. And then the property was gutted and it's just a mess. And, yeah, I'm still carrying a mortgage on the, like, I sold the property to a guy with owner financing. But other than that, everything's invested in the stock market. And are you a Vanguard dude also? Yeah. Yeah.

And when you say stock market, do you choose individual stocks or do you, with index funds? What's your strategy? Yeah, we're all index funds. So we're roughly 70% US market, like 25% international, and then a little bit of sprinkling of like a very small amount of bonds and a small amount of reeds. Do, like Winnie, did you have the same, were you saving money, because you mentioned you were saving 50% of your income? Were you putting that in a savings account or were you investing? And when the two of you got together, did you have the same investing styles and philosophies? Or did you have to? kind of compromise on, you know, in terms of, was one of you more risk-averse than the other?

How did you come together on that? Before, I put the money in the Taiwan local start market and some international index fund. And we call it my running away money. So I keep it as my own. And our common spending is coming out of a... Jeremy's pocket. Sugar daddy. Sugar daddy.

Yeah. Wait, is that how it's set up now? Managing money as a couple is always like one of those tricky, you know, tricky things. Some people merge it all together. Some people keep everything separate. So you guys, your living stuff is somewhat together, but you have your side running away, do whatever kind of funds.

As I mentioned, I have this insecurity about money. Yeah. So I need to make sure I have my own secret stash. Well, that's not so secret when you tell me about it. Yeah, but he knows about it, you know. That's good, though. I mean, I think that's important. Like, I know, like, my wife and I, we have, we have everything in the main one,

but we also have just, like, a separate savings account each. And then be, like, maybe $3, four, $500 in there, nothing too crazy. But it was like, we can do whatever the hell. Like, if I wanted to spend $500 on a coin, I could do it. She can't, like, question me if she wanted to, like, buy shoes for, 200 bucks, which you'd never do. But like that was fine. Like you could do whatever, you know, and I know like that strategy kind of works with a lot of couples. So that's why I ask. Actually, we write down every spending since we met. So like we know how much we spent.

Like there's no hiding and it's just very honestly. So yeah, that's good. Well, now I can get any juicy secrets from you because you guys already know everything. How much if you, if you, if you don't mind me asking, how much were the two of you making during this time, the time that you were saving at least 50% of your income? Like over the 10-year period, it comes out to like 135K. Per person or combined? Combined. And the last three years, like when he wasn't working, so that was just my salary at the end. I started out at the beginning a much smaller percentage, but then we grew that to like 70%. And then those last three years, you know, like my whole paycheck. Well, what's interesting about that, too, is if those last paychecks were going in around 2008, 2009, 2010, oh, my Lord, like, that's double, tripled whatever, you know, like immensely.

Like, that was like the best time your whole life that you've invested. Yeah, that was the opportunity of a lifetime. That's awesome. When you say 50 to 70% savings rates, you mean after tax income or pre-tax? Yeah, after tax. Cool. So in the 10 years, like you started out, let's say, like 5% savings. And then did you just keep finding way, like cut expenses and anything you, you know,

saved, dropped into the, into the savings or investments? Like, how did you go up over time to eventually get to 50, 70% or whatever was? Yeah. So no $200 shoes. Yeah. Always wear a flip-flog. And we found out the measured cost of living is housing and transportation and food. So we try to save a.

much as possible in those three areas. So like living, instead of living in a big house, we just ran the really small apartment in the student neighborhood. So we pay $9,000 in Seattle is quite cheap. And for food, we start to cook more at home. Winnie's like master chef level. Have you seen the picture of Jeremy? He's a handsome young man.

I don't know what you're talking about. I'm just saying he loves my food. All right. Well, Paul and I will fly out there after we end this podcast and taste test. Yeah, and then he will even bring a lunchbox to work. So the cost of food is quite low after we did that. Right. And for transportation, he would ride how many miles?

To work? If I took the short way, it was eight miles. And if I did the long way, it was like 21. 21 miles to work. On a bicycle? Yeah. I sure you want to do that? Like, when you're in the meeting room, people will smell.

I shower when I get there. Sometimes. Depends on what the meeting was about. It fits with your attire if you're still wearing the same jeans and shirt that you had when you guys met. So, like, we both bikes. We don't own a car. We don't own our own transportation. So in those three areas, we saved quite a lot.

That's awesome. Jeremy, like I remember you wrote an article for me, I don't know, a year or two years ago now. But the funniest part, like your story was awesome, is really helpful and all that. But it was like when you left work and you sent like an email to like everyone saying you left work. Yeah. Tell us about that because it's just, I don't know, I just like that story so much. And then what happened after you sent the email? Well, you know, I sent like my goodbye email.

It was basically like, hey, I'm retiring. In there, I included the video from Pulp Fiction, where they're like in the diner. And it's like, what do you mean you're going to walk the earth? You know? And like, you're a f***um, you know? Like, yeah, that's pretty much my life. That's my goal, right? So I sent that video out to everybody.

Like, just, hey, because everybody's asking all the same questions, like, this summarizes it right here. This video is my life now. I had so many people after that where they're like, what? How can you do this? You know, like, I can't even pay my mortgage or my wife spends all my money, you know, like, tell me how you did this. And so, like, I started the blog kind of, or in part out of that because everybody was asking the same questions. And so I just wrote the answers down.

But, like, I got so much free coffee and free beer, like those last couple weeks, it was awesome. Your blog, Go Curry Cracker, you explained it in one, but it took, it was like a year until I found out, why did you name it Go Curry Cracker? So, for our honeymoon, guess where we went? Oh, I know the answer. I know the answer. I read it in Forbes. So we went for a 100-mile hike around Mount Rainier. The first day we were all happy. And by day three, I already want to get a divorce. But there is no way out. So we have to, like, I made those homemade curry cracker. So we have to use that to cheer us up. Like, oh, let's walk one more mile and then we can eat this cracker.

I like that. I like the way you explained it before, though, like where I would dang go the cracker in front of you like the carrot with the donkey. I always thought it was something like because Cracker like I grew up all over the world too in the military but all the places that I was like I lived in Korea and everyone called me Cracker like for a wipeaway. So I was always wondering if it was something like to do with that or not. Yeah. Yeah.

I'm yellow. I'm curry and Jeremy is the Cracker. Yeah. There you go. I like it. Yeah. Also what I like about your stuff. And I don't know, Wendy, how if this part, like, I know, like, Jeremy at least he loves

blogging about taxes. I don't know how much you do or not. But what's interesting is, and even recently, like, you wrote an article, like, for the last two or even three years, you know, you guys have made a substantial amount. Like this year, you guys made like 100 grand. But when it came to tax time, you didn't pay anything, which is, like, unbelievable. And you always get that, well, like, how come you don't pay taxes? That's, you know, an American or whatever.

Well, wait, wait, wait, wait, pause here. I didn't know any of this. So number one, how are you making money? And number two, how are you not paying taxes on it? But first, when we were working, we pay tax. A lot of tax, too much tax. Yeah, it's mostly a game. One of the anchor posts on the blog is called Never Pay Taxes Again. It just outlines how when you can design your life such that you're living largely off of investments, you can make close to 100k a year in long-term capital games and qualifications. dividends, and those are taxed at 0%. And then we have a bunch of money in our traditional IRA

and 401K. I move some of that money over every year from the 401k into a Roth IRA, just up to the size of like our standard deduction and personal exemptions. So that wipes out the tax bill on that. And then like 20K a year and then 70 and harvested capital gains. Well, wait, our long-term capital gains are taxed at what 15%, aren't they? Depending on what marginal tax bracket you're in? as long as your total income is such that you're in the 15% tax bracket, which for a married couple filing jointly is about 100K, they're taxed at 0%.

And then if you go above that, they're taxed at 15%. And then after some ungodly number later, they're taxed at 20. There is no money in Panama. That's right. Yeah, our name isn't in the Panama paper. And there are lots of people Googling, like, how can I not pay tax ever again? and then link to our website.

So now you know how people hate to pay that. So I'm looking at that post right now. It looks like, see, a lot of this comes from Roth IRA conversions. Yep. So can you talk about that a little bit? I'm looking at a post right now, but. Yeah. A Roth IRA conversion is at any time you can decide that you want to move some money from your

traditional IRA to a Roth IRA. And that's a taxable event. when you do it. Right. Because of the standard deduction and personal exemption, a married couple can claim about 20K on a tax-free year. So I just kind of fill that bucket, like that first 20K with a Roth conversion. Now I put that money into the IRA tax-free. It grew tax-deferred, right? But then I move it into the Roth. Tax-free. And then when you eventually withdraw it, then it's also tax-free money because you're withdrawing it from a Roth. Exactly. That makes sense. So with that too, like a lot of people, especially me and even what I do now and just since

blogging for eight years, like I've always been taught that like rods are good to start. Roth IRA is good to max out every year. And then I got into the early retirement crowd. And everyone's like, no, don't do that. Put it all in traditional. And then later convert it. And I have never been smart enough to do that. I still out of habit or out of being dumb.

I don't know. I just max out my Roth every year. And I'm like, oh, I'm sure later I'll figure it out. and then I have a SEP IRA too. And a lot of people comment, hey, dude, I know you want to be really tired. All your investments are all that, like, you're not going to be able to touch them until like you're 60s. So like what the hell are you going to live off of?

You know, so this is like strategy going back to your 10-year thing when you knew that you were going to do this down the road. Well, well, wasn't it? So when you were in those 10 years that you were planning for early retirement, did you choose to save in a traditional IRA because you were anticipating doing a later Roth conversion or did you figure that out kind of down the road? I figured that out later, but before I retired. But I was firmly in the 25% tax bracket,

and so I was just using traditional accounts as much as possible. It's like I never contributed to a Roth account while working, actually until this year, other than the Roth conversions. What was your reason for that? Was it just to lower your tax bill during those working years? Yeah, exactly. So I was getting a 25% savings off the top and then investing that savings as well.

You're just trying to build as much as possible. And then you can access those accounts before age 59 and a half as long as you do it in a couple IRS approved ways. But because we were saving such a large percentage of our income, you can only put 18K a year in that 401K. So we ended up with a ton of money in taxable accounts. Yes. So that's mostly what we're living off of. And then the first three years, our blog made like $0. But this year, it actually made enough to pay pretty much all of our expenses.

Yeah, I remember you complaining that you now are making money. You have to figure out how to deal with taxes, especially when that Forbes article hit. I just published our tax return for this year. It was like 100K in income, like 40K in blog income. And the IRS paid us $5. And what is your stance on the not paying taxes? And it's a little different because you guys don't actually. you live in the U.S., but at some point you did, right? Or do you have a thing like the hate that

comes out of it is like, well, you use like our public roads and libraries and you use stuff that tax people are paying, but you're not paying taxes? Like, do you have a thought on that or do you not care? Or what's your, I mean, when people ask you that or if they do, what do you say? You know, someday when I run for Congress, I'll happily like use our example as like, you know, you should definitely make it illegal for this to happen. It makes no sense that we can do what we do. I kind of do it as a game and to raise awareness of it, but we also paid over $500,000 in taxes while working. So we paid well more than what, you know, kind of a median earner in the U.S. will pay for their entire lifetime working. So, you know, if you want to average it out,

like we've paid our share. But we're not in the U.S. If we were in the U.S., I'd still pay the legally, the minimum legally allowed. So if somebody wants to protest and yell at us, which they do sometimes. I just ask them to send a check to the U.S. Treasury and I'll match it. Oh, really? Nobody's taking me up on it. But it's like, you mail a voluntary donation of extra money more than what you're required to pay. You refuse to contribute to traditional IRAs and you refuse to take the mortgage tax deduction. You do that. Then we can talk.

Well, it's true. Yeah, nothing you're doing is illegal. It's all very much legal. As Trump likes to say, everything is like he's just doing the law, right? So there's nothing shady going on. Yeah, and it's not even like loopholes. You know, it's like this is the way the law is intended to work. It's like if you live off of investments, you have very friendly tax rates. Well, that's what I do. And a majority of people, like, even if they know about it, they're not in the financial position to even do that because they're strapped with debt and they haven't like had that epiphany and they're, you know, like a very tiny, tiny, tiny percent of all Americans are doing what you're doing.

And you're not alone, right? Like the other financial, early independent or early retirement financial bloggers are all doing the same thing, right? And I mean, I do to an extent, too, if my accountant says do this and this and save taxes, hell yeah, I'm going to do it without even thinking. You do it. Yeah. Yeah. Yeah. So it seems like a lot of the tax savings are coming from the fact that you're not making ordinary income because ordinary income in the U.S. is taxed pretty heavily.

But dividend and capital gains income is not. Yeah. That's exactly right. So I have like four principles that you follow to never pay taxes again. And the first one is to choose leisure over labor. Right. Which means no ordinary income, right? Yeah, don't work.

Yeah. Because once you have a job, there aren't very many options. It's like the social security comes off the top and then the withholding happens and it's gone. Right. Whereas with the investment income, you have lots of options. What are the other four? Yeah, go down the list. I'm writing this down so I can step one, don't work.

All right. This is my last podcast episode. I'm looking at it right now. Choose leisure over labor, live well for less, leverage Roth IRA conversions, and harvest capital losses and capital gains. Yeah. So the live well for less, if you're going to spend 100K, 200K a year, you're going to pay taxes.

You just can't withdraw the money from your portfolio without having some kind of taxation. You're either going to pull it from your 401k and get taxes, ordinary income, or you're going to have to sell larger gain that it'll be taxed at 15% above a certain level. But if you can live on like 30, 40K a year as a couple, which is what we're roughly doing, you end up in the sweet spot where you don't pay any tax.

Because the amount that you're withdrawing from your investments is less than the deductions that you can take. Exactly. And then the other two principles are largely around how you eliminate future taxes. So you're not working. So you have this space where you can do the Roth IRA conversion. If you don't do anything, it's just gone forever. You never have that opportunity again. And so we move it into the Roth IRA and then now we can grow for the next 30, 50, 60 years.

Right. We also, like every year will take some stock that's appreciated and sell it and then buy back a similar investment. I'll realize a gain of 2030K. And it's taxed. It's just taxed at 0%. And then now my basis in that investment is, has been raised by that amount. And so in the future, when we need to sell some stock or the stock market drops,

like we have the opportunity to harvest a loss. Yeah. Now, let me actually pause you right there because there are pretty, there are certain buyback rules in place. You know, there's, I think, a 30-day window during which time you cannot buy a substantially similar asset. Yeah, that applies to losses. It doesn't apply to gains. But the wash sale is basically like if you have, like if you own some Microsoft stock and you sell it for a loss and then you buy it

back right away. And that loss, then you can't claim that loss of this year's taxes. Right. But if you have a gain in that stock and you sell it and then buy it back, you know, like it's a taxable event. Like the IRS is like, oh yeah, this is cool. Like we're going to tax you on it. But it just happens that the tax rate was zero percent. So the wash sale ruled up. doesn't apply. And the tax rate is zero percent because your earned income is low enough that you still fall within the 10 to 15 percent marginal tax rate bracket. Okay. So that is the key to all of this is staying within that tax, the 10 to 15 percent tax bracket. Yeah, exactly.

Is another key to like roughly, because you've been around 100,000 in the last couple years, is that, like, do you find like anything over 100,000 gets harder to not pay taxes on? Yeah. Okay. And you can do like 150 and as long as you, you're okay with paying taxes and it's fine. Yeah, exactly. Roughly for a married couple like this year, you know, it's like $20,600 is the size of the standard of deduction and personal exemptions.

And then you get like another, I think it's like 76K. Above that is the upper edge of the 15% tax bracket. So you're at like 96ish. Yeah. And with kid, now you have a beautiful baby boy slash girl. I can't remember off the top of my head. Boy, boy. Oh boy.

Yeah, he's got a big personality. So he keeps his going all the time. help with the tax stuff or not in this case? Yeah, so we get like an extra exemption, an extra 4K that isn't taxed, and then we also get the child tax credit, which is a thousand dollars off the tax bill. That's how we ended up having the IRS pay us five bucks this year and save. And it's interesting too because most people that are retired, A, don't just have a kid, right? And then most people that early retire, usually they already have kids if they're going to. but in your case you guys are both already retired

and then you decide to have a kid like is the boy does that like pros and cons in this right like now you have a lot of time to spend you know with them does it get wonky or does it change any of your finances with this new expenditure too or how does that work?

You know like I think this first year he didn't really cost us anything there's like some diapers and some formula but you know mostly breastfeeding and I think after like the tax savings it comes out about a wash We were planning this for a while. He's a test tube baby.

We had money set aside for the IVF. And then we have his college fund basically already earmarked. When you plan 20 years in advance for college, you don't have to save. You don't have to save very much for it. And let me guess you found a way to do it the most tax-effective savings way or something like that. Of course. So how are you saving? Do you use a 529 plan?

Are you using? We're basically just, like, I have it yearmarked in our taxable account. But because, like, we're raising our basis every year, we'll be basically at zero basis by the time he goes to college. And then I'm going to figure out a way here in the near future to, like, hire him for the blog. Because if he does, yeah, like, I don't know. I have to figure it out yet. But, like, I can pay him up to 6K a year, completely tax-free, no-so security. And then he could invest $5,500 to that and do a Roth IRA.

By the time he gets 18, he'd have at least $250K. Oh, my Lord. And what if he's like, dude, I don't want to go to college. Like, I want to do, I just want to, like, I've been saving for 18 years. I want to retire now. What are you going to say to that? That's cool. I think, like, our main goals, you know, are just like healthy, happy kid.

And they're going to be so, like, give him this, like, worldly view and kind of a mindset of how do you solve, problems, kind of like an entrepreneurial business mindset. And then he'll figure it out from there. Yeah. And that's what's interesting too. He's like he's going to be growing up in this world that's completely different than 99% of the population, you know. And he's going to be so much smarter and more cultured by the time he gets even talking probably. So that's fascinating, especially if your family continues to like get kids and then they're going to have this whole lot generational of like smartness like oozing out, like taking over the world. I like that's your take on it, because we also get a little bit of hate from that.

Really? Yeah, just like your kid's going to be messed up psychologically because he doesn't live in one place and blah, blah, blah. And people project their own issues on you, but I think he'll be fine. Well, I've heard the argument about actually someone wrote an article recently about like they were afraid they were going to spoil their kid in early retirement because they're going to like get everything and they're going to be like having so much fun. And the article, I wish I could remember. It was really interesting. They took the approach of like we're going to be teaching them to learn and think on their own. And because you guys are so good with your money, it's not like you're all of a sudden.

Oh, dude, here's like a free car on us. Like, oh, here, I'll just pay for everything because that's not like what got you guys to where you are. You know, so I think like all those values, you're going to be instilling like mad values into this kid. You know, and yeah, he's going to mess up and do stupid stuff. But yeah, he's going to be so much better off than the average person that maybe never even has an epiphany. Yeah, and I think the more mistakes we can allow him to have early, you know, before they're, you know, like, while they're still small, that's how you learn. It's like, go do stuff, make mistakes, figure it out, you know, and we're here if you need, if you have any questions, you need to help with anything. Yeah, that's a good position to be.

With your blog, and this is kind of like random, but I'm just kind of curious. Like, you started a couple years ago, I remember when you first came on the scene, the interesting part with people like you that have this story and this different view is you can come on the scene. and create like a blog and like the potential for it to blow up and to get traffic and money is so much bigger than you know someone like me if I just started today like I have no interesting story um you know right like I'm like an average person right so you come on the scene and you do this but what you are smart about was that you put your story like you're really raw and like here's like I mean like you made 100,000 they paid taxes and here like you're so open and honest about it. And so my question to you is like for anyone else out there starting a blog or something

online, you know, what are some of the pros or what are some things that you've learned that are good or bad just in the last couple years that you've done this? Like, like, what have you failed on and what have you done good at that maybe you didn't expect? The blog has definitely been like way more of a success than I ever thought it would be. I actually think most of it is just luck. I don't even know what kind of metrics to use for, but I think we're at like three and a half million page views in two years. That's crazy. You know, most of that's from the last year. I had this idea of like I wasn't going to try to promote it or anything until we had like, you know, a year of our travels under our belt or anything. So like I wrote about it, but I just never like reached out

to anybody to try to get traction in the media or anything. But I think the main things are just like have your story, whatever it is, whether it's like I'm an average guy or I'm like this weird guy who still as wears the jeans he had 10 years ago. The biggest return has definitely been just from connecting with mainstream media. So, like, we've been in Forbes and MSN and Yahoo and Business Insider and CNBC and BBC, like all the big names.

And some of that is, or a lot of it is through, like, conscious effort, like trying to connect with people who write articles for those publications. Oh, how have you done that? So some of it through, like, I follow a lot of people on Twitter who have written articles in this space, like personal finance articles or early retirement and so on. And then try to connect with them. Like they publish a new article. And so like you retweet their stuff and like make comments on it. And then after a while they sort of like recognize your

logo. And then you can reach out from from there. And most of the time people just like don't reply. But every once in a while it pays off. And then once you have your first mainstream media, now you have some credibility. They think, oh, well, he was in Forbes. I guess I could write an article too. And then it kind of snowballs from there. What do you say when you reach out to them? Usually I, like, compliment them.

You know, like, hey, I saw your thing or saw your article about this, and I thought it was really cool. I think you might be interested in this, right? Like maybe share something else that kind of is in a similar theme. And then, like, offer help. Like, they're looking for work as well, right? So, like, hey, I can provide you with, like, another story that you can share. And it's kind of a win-win for both of us.

Yeah, I love that, dude. Yeah, reaching out, I mean, because you're just giving them help and nice words, like, especially if you're not asking for anything off the bat. That's, like, the best thing you could get, right? Like, people love bloggers, producers. We love when people say something nice about us. You know, like, we like it. Usually we respond to that because every human being likes that.

That's good, man. Man, I have to say, this harvesting capital gains thing is, like, what I'm, is still what I'm thinking about right now. It's all percolating over there. Well, you know, it is because I'm sorry to like totally change the topic here, but it's just like really sticking in my mind because I've never heard anybody talk about the strategy before, but it completely makes sense, just continually raising your cost basis within an investment.

Yep. I guess the missing component that I didn't realize until this interview was that there are no wash sale regulations on capital gains. Those regulations are only on capital losses. The capital gains should be, should generate a tax advantage for the IRS. So they've never had a motivation to write a rule against it, whereas the loss is always in your favor. Right. One of you guys explain the basis thing for regular people, because I understand it barely and, you know. Okay. Jeremy, you go ahead. So let's say you buy a stock for, you know, You spend $10,000 and buy a stock, and then the stock goes up to $20K.

Your basis is whatever you purchased it for. Your real cost, it's $10K. Your gain is whatever amount you have over that basis. So you also have a $10K gain. Now, if you can sell that stock and then buy it back, your new basis is $20K. Okay. Your new purchase price. And technically, that gain was taxed.

It was just taxed at 0%. Right. Only because of your situation, like the average person, No, no, no, anybody who is within the 10% or 15% marginal tax bracket would be taxed on that gain at 0% assuming that it's a long-term capital gain, which means that they've held that stock for one year or more. Exactly. Held that asset for one year or more. Okay, so those are the two main variables that someone could take advantage of this thing. Now, let me ask you this then.

So let's say you didn't do that, and the next year it's up to 30,000. your basis is still 10,000. You still have to pay tax on the 20,000, regardless whether you do 10 now or 10 later. But is it still zero or is it not zero? And that's why it's better. Well, let's say it's more like you waited 20 years. Okay. And it's like 150,000 instead of 10, right?

And I was raising my basis 10K a year the whole time. And so when I solve to pay for my kids college, like I pay zero tax. Okay. Where you would have a tax due on 140K gain. and that might be tens of thousands of dollars and it just kind of depends on how much other income you add. Right. So you're doing it to keep,

so you just want little transactional taxes throughout your life versus this big major ones down the road. Exactly. Well, because that would keep you in the 10 to 15% marginal tax rate bracket. Right, right. Because you're only converting 10,000 versus 110,000. So the key is to stay within that tax bracket. That was my big epiphany on this podcast.

was that that is the key to being able to harvest capital gains in this manner. Is, yeah, designing your finances in such a way that you remain within that tax bracket. Yep, that's the live well for less. And obtaining that bracket through long-term capital gains and dividends rather than ordinary income. Yeah, that totally makes sense. And this is all outside. This is like if you had like a brokerage account not relating to real estate, like e-trade account or whatever, wherever you invest in. just pick up stock outside of an IRA or 401k or any of that stuff, this is all outside of it.

Yeah? Exactly. Yes. Inside doesn't matter about the basis or anything. It just matters about when you cash out and does it trend, you know, and does it, like, you're doing these conversions and everything in a smart way, but like an average person, like they get dinged whenever they get dinged, whenever they take it out. So all of that withdrawal is taxed as ordinary income whenever it's withdrawn.

Okay. Now, do you have a hack? for me converting all my Roth IRA money into something tax-free and my SEP IRA money into something. Well, the Roth stuff will already be, like, that's already done. Oh, yeah. Previous year, those are all tax-free. But your SEP, like, if you ever take a year off, you know,

or like you have no income for one year, you can do a Roth IRA conversion that year. So if you're like, hey, I'm going to take a sabbatical and go, like, do it on the world trip with my kids or something. Yeah, yeah. Like during that year, you could move over. a big portion. Oh, because a SEP is similar to a traditional IRA, right, just for like self-employed people. Yep. Okay, okay. This is making sense. So I can still do all these tricks as long as I set myself up to understand the limitations and whenever I need to. Okay, I got you. A big piece of this is not having

ordinary income because I actually spent some time trying to determine whether I should be investing in traditional or Roth IRA. Because within the early retirement community, Jeremy, a lot of people, Jeremy and Winnie, a lot of people do what you do, which is while you're working, they will invest in a traditional IRA. And then after you retire when your ordinary income falls to zero, that's when you make the conversion from a trad to a Roth. And so I looked at that. And I, for me, myself personally, I came to the conclusion that I don't think that there will ever be a time in my life when I don't have ordinary income. And so because of that, I decided that I'm going to for me personally, I'm going to prioritize Roth accounts above all else because I choose to have

ordinary income throughout my entire life. Okay. And let's explain what ordinary income is for people and also for myself. The IRS has way too many names for different things. Ordinary income is basically everything that's not qualified dividends or long-term capital gains. Like, is taxed the same way. But usually it's like money earned from a job or from self-employment, from interest, from real estate. Well, real estate is actually a little bit, it depends on how the real estate is structured because the IRS sees real estate as passive income. Unless you fulfill certain particular qualifying criteria, like working within the business a given number of hours per year, in which case the IRS could view it as

active income. So basically, what I'm saying is real estate, depending on how it's structured within your tax form, could be viewed as either passive or active income, and there are significantly different tax implications of each. Yeah, so real estate is kind of its own. Yeah, it's its own thing. Depreciation and so on. You have a lot of kind of a whole other tax path. Yeah, that's a whole a different conversation. But so to leave real estate out of it and to go back to your original question, Jay, which is what is ordinary income? All right. So let's say, so like, I used to have, well, you just use me as an example since I know me versus people that are listening.

Like I worked at 9 to 5, right? I got regular W-2s or whatever. I got a regular paycheck. Then I started my blog on the side, and it started making money. Both of those so far are ordinary income, yes? Yes. Yes. Okay. So now I don't have the 9-2. to five anymore. All I do is blog and consult and I hustle and all these hustle streams together are all still ordinary income. If someone's paying me to do something. Yeah, because you're self-employed. Because I'm self-employed. Anytime you're trading hours for dollars, it's going to be ordinary income. Yeah. Okay. So Paula, so knowing what we know about you, you love real estate and you want to build this big financial empire that helps people and that's like your legacy and you

want to be the next Dave Ramsey, that's a girl down the road, right? Right, right? So for you, you're always going to have this income because you're not going to want to give up this whole empire. So this is all going to be ordinary. And that's why? Well, so real estate income is different. I don't want to get into that right now because that gets really complicated. So let's not talk about the real estate income because that's a different show. Okay.

All you have is afford to anything. This podcast blows up and is making millions of dollars. So you're making tons of money from your blog empire. and the money show. I hope so. But yes, as long as I am doing that, that is I am actively running a business. Yeah. And therefore that is ordinary income.

Ordinary income. Okay. So Jeremy, all your stuff is not non-ordinary because you make money 30,000, 40,000 from your blog. So that's ordinary income. But because of the way you've structured it with taxes, you just happened to not pay taxes on it. Yes. And if we didn't have a child, we would have ended up paying.

and like a small amount. Okay. But because of an additional deduction and the child tax credit, it worked out as a five bucks back. Yeah. Okay. This makes sense for an average person. I always have to be the average person because you guys are too smart for. Like, that's why you both are financially free and I'm not yet.

Jeremy, how much money is the blog making? It's like you said $40,000 a year about? Yeah, it made like $40K last year. And I think it'll do more than that this year, but TBD. Yeah. Well, and that's the thing like for, Like you, like Mr. Money Mustad, like you guys didn't start, and I'm big on this. Like when people say I'm going to start a blog to make money, I always cringe a little bit because going into it for purposes of making money is way different than just doing it because you're passionate or want to help people.

It's just different, right? And the odds you succeed are stacked against you anyways. But for you, Mr. Money Mustach, some of these other early retirement people, you guys got on here to talk and to help people and to like share tips. and then like the money was all extra. Is that pretty accurate or did you? Yeah. Okay. Yeah.

I mean, like I didn't even really try to monetize it until when he was put on bed rest for a while during the pregnancy. Okay. You know, and so like we were just kind of sitting at home for a few months, right? And it's like I needed something to do. So I started working on growing the blog. Naturally. Yeah. But yeah, prior to that, it was just, I just wrote it for like purely for fun.

And that's still mostly what it's for. Right. And so, and for you, like, for, For people that are quote early retired, because this is another thing we get like, oh, you're retired, you're not retired. Like, you work. You write your blog. Like, you can't say you're retired. Right.

And like the early retired and financial freedom are so often swapped around. You're, quote, working because it's something you choose to do. Like, you don't have to. Like, if you never blog a day of your life or ever do any work ever again, unless something crazy happens, you've set yourself up to be able to have enough money to live forever. Yes. That's the key. And on like a scale of hours involved, I spend more hours in the bathroom in a given week than I do blogging. I don't know if that's good or bad, but I'll assume that's good.

You might want to see a doctor about that. Oh, man, that's hilarious. Well, man, like this is, you taught Paula something? You both taught me some things. I appreciate you coming on the show, man. I mean, where can people find you? Like, are you, you know, where do people reach out to you? Where can they find you?

Are you working on anything else? What do you want to promote? What's going on? I mean, like, there's the blog, go currycracker.com. You know, we also have some fun stuff on an Instagram. Also, I go curry cracker. Like, we post a bunch of travel photos out there. And then, uh, Winnie's writing a book.

If you read Mandarin, it'll be out this fall. Winnie, what's your book about? I have a Chinese website. So, like, Jeremy's website is more about facts and foreign stuff mine is in Chinese and more fun because you cannot read it so I can say that

so I can say that so one book publisher just signed a contract with me and I'm going to publish a book about our life and how to save and how to be financial independent when you're still young

wow it's beautiful Oh, congrats. Thank you. Hopefully I can finish it. Is there any chance they might translate it into English? Like, they might do an English run? Or we can find a publisher for Jeremy. But I only rate boring fact, basically.

Some people read that. That's right. That's right. Yeah, next one, we're just going to have Winnie on this show to talk about all the fun stuff, Jeremy. There are lots of geeky people like you, you know. Yeah, it's true. I'm curious. Do you talk to your son in?

English or in Mandarin. How are you going to navigate that? I talked to him in Mandarin, 100%. And Jeremy talked to him in English and really bad Chinese. So, that's awesome. My Chinese sucks, but I speak mostly English and when he speaks mostly Chinese. That's fascinating. That kid's going to be so freaking smart. I hope so. Yeah. Keep loving them and keep teaching them all these. tricks. I mean, this is all, imagine if the freaking world, like, started learning this stuff early on. I can't even, I can't even comprehend. So good job, guys. Yeah. Well, thank you guys so much for coming on the show. It's been fun. And we learned a lot. Obviously, one person is like, Paula's probably not even paying attention anymore. She's probably like running numbers in her head right now.

I actually just looked up a chart of taxable income brackets. And yeah, you're right. If your blog income is $40,000 and you're married filing jointly, that puts you in the 50. 15% bracket. Wow. Jeremy is always right. So yeah, and then you can harvest your gains and increase your basis every year. Yeah, wow. That is my lesson of the day. Our 2015 tax return is the latest blog post. Oh, cool. I'm going to read that. I'm going to skip the post and just go straight to reading the return. Thank you guys so much. I appreciate you guys coming on. Thanks, Jay. Thanks, Paul. Thank you so much. Congrats on the baby.

Thanks so much. Hey guys, thanks so much for listening to our show. If you enjoyed it, please subscribe and leave us a review. Thank you. As long as you're still like your young, youthful, Jeremy, I'm a rock star badd-staffir traveler. People will listen. Yeah, and with four hot chicks around you. There you go.

That's a really interesting, but there's only room in my life for one hot chick. Oh. Okay. Okay. It's smart.